SKY IS D LIMIT TRADERS Extract from the list of balances as at 28 February 2018: | Description | Amount (R) | |----------------------------------------------|------------| | Capital | 3,500,000 | | Drawings | 499,500 | | Land and buildings at cost | 500,000 | | Helicopter at cost (1 March 2017) | 5,000,000 | | Accumulated depreciation: Helicopter (1 March 2017) | 2,250,000 | | Trade receivables control | 409,800 | | Inventory (1 March 2017) | 350,000 | | Bank (Favourable) | 300,000 | | Trade payables control | 492,000 | | Long-term loan: 1502 Bank | 6,000,000 | | Fixed deposit: FAC Bank (12.10%) | 800,000 | | Insurance expenses | 255,000 | | Interest on fixed deposit | 48,400 | | Water and electricity expenses | 88,000 | Additional information: 1. On 1 June 2017, invested in a three-year fixed deposit at 12.10% interest per annum, payable quarterly. Account for outstanding interest. 2. Insurance expenses include a six-month premium of R90,000 paid for the period 1 February 2018. 3. Long-term loan repayable annually on 30 September, R400,000 starting 30 September 2018. 4. Water and electricity account of R8,000 for February 2018 received but unpaid; no entry made. 5. Physical inventory count on 28 February 2018 is R250,000. 6. Trade receivables overstated by R9,000; no entry made. 7. Helicopter (ZAXHF) traded in on 1 December 2017 for new helicopter (NAXBP) costing R9,000,000; depreciation at 5% per annum straight-line. 8. Land and buildings are not depreciated. 9. Total comprehensive income for the year after adjustments is R1,737,000. Required: (a) Prepare the statement of financial position as at 28 February 2018. (b) Prepare the note for property, plant and equipment for the year ended 28 February 2018.
Answer (1)
To prepare the statement of financial position and the note for property, plant, and equipment, we need to make adjustments based on the additional information provided and update the initial balances. This process involves calculating adjustments for interest, insurance, depreciation, inventory, trade receivables, and other financial statement components.
a) Statement of Financial Position as at 28 February 2018
Assets
Non-Current Assets
Property, Plant, and Equipment
Land and Buildings: R500,000 (not depreciated)
Helicopter: R500,000 (after adjustments explained in notes)
Investment
Fixed Deposit: R800,000
Current Assets
Inventory: R250,000
Trade Receivables: R400,800 (R409,800 - R9,000)
Cash and Bank: R300,000
Interest Receivable: R60,500
Total Assets = R2,311,300
Equity and Liabilities
Equity
Capital: R3,500,000
Drawings: -R499,500
Total Comprehensive Income: R1,737,000
Total Equity = R4,737,500
Non-Current Liabilities
Long-term Loan: R6,000,000
Current Liabilities
Trade Payables: R492,000
Accrued Expenses (Water and Electricity): R8,000
Total Liabilities = R500,000
b) Note for Property, Plant, and Equipment
Land and Buildings : R500,000 (No depreciation)
Helicopter :
Cost (1 March 2017): R5,000,000
Accumulated Depreciation (1 March 2017): -R2,250,000
Depreciation :
Helicopter: Traded in on 1 December 2017 for a new helicopter costing R9,000,000
New Helicopter Depreciation: R750,000
New Helicopter (NAXBP) :
Cost: R9,000,000
Depreciation: R750,000
In preparing these sections of financial statements, it's important to ensure all adjustments are accurately calculated and applied to portray the true financial state of the business.
